dotStrategy Co. v. Facebook Inc

District Court, N.D. California·Decided November 20, 2021·No. 3:20-cv-00170·Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8

10 DOTSTRATEGY CO., 11 Plaintiff, No. C 20-00170 WHA

12 v.

13 FACEBOOK INC., ORDER GRANTING SUMMARY JUDGMENT 14 Defendant.

15 16 INTRODUCTION 17 In this action for misleading business practices, plaintiff alleges defendant falsely 18 represented that it would not charge plaintiff when defendant determined that a fake account 19 had clicked on plaintiff’s advertisement. Summary judgment for defendant must be GRANTED. 20 STATEMENT 21 Plaintiff dotStrategy Co., a for-profit corporation headquartered in Conway, Arkansas, 22 operated the generic top-level domain registry for the “.buzz” domain name. Plaintiff sold the 23 right to operate a website with the .buzz domain name. At all material times, Bill Doshier was 24 the sole managing member of plaintiff. From December 2013 to May 2018, plaintiff had 55 25 advertising campaigns on defendant Facebook, Inc.’s social media platform, for which 26 Facebook charged plaintiff about $8,000 total. 27 For each of the 55 advertising campaigns, plaintiff chose among four different billing 1 • Cost-per-click: Facebook charged when a user clicked on the ad. 2 • Cost-per-action: Facebook charged when a user performed an 3 action specified by the advertiser, e.g., “liking” the ad, clicking a 4 link in the ad, or installing an app connected to the ad. 5 Importantly, for cost-per-action billing, each action was 6 necessarily a click, but only the type(s) of click specified by 7 plaintiff for that campaign would generate a charge. 8 • Cost-per-impression: Facebook charged based on the number of 9 “impressions.” An impression occurred when the ad appeared on a 10 user’s screen, regardless of whether the user had any other 11 engagement or interaction with the ad. 12 • Optimized cost-per-impression: This billing choice was a hybrid 13 between the cost-per-action and cost-per-impression methods. 14 Under optimized cost-per-impression billing, Facebook’s 15 algorithms showed the ad to users more likely to engage in the 16 action specified by the advertiser. Importantly, however, the 17 advertiser was still charged based on the number of impressions 18 only, regardless of whether the user took the action the advertiser 19 chose to optimize for. 20 At all relevant times, before placing ads on Facebook, plaintiff agreed to Facebook’s 21 terms of service, applicable to everyone who used Facebook. Facebook’s terms of service 22 have prohibited fake or inauthentic accounts. Specifically, the terms have stated (Dkt. No. 23 125-20 ¶¶ 8, 9; Duffey Decl. Exhs. 5, 6): 24 3. Safety

25 We do our best to keep Facebook safe, but we cannot guarantee it. We need your help to keep Facebook safe, which includes 26 the following commitments by you:

27 * * * otherwise access Facebook, using automated means 1 (such as harvesting bots, robots, spiders, or scrapers) without our prior permission. 2 * * * 3 4. Registration and Account Security 4 Facebook users provide their real names and information, and 5 we need your help to keep it that way. Here are some commitments you make to us relating to registering and 6 maintain the security of your account:

7 1. You will not provide any false personal information on Facebook, or create an account for anyone other than 8 yourself without permission.

9 * * *

10 7. You will keep your contact information accurate and up- to-date. 11 In addition, the terms have included the following disclaimer language, which applied to 12 plaintiff’s use of Facebook for advertising (Duffey Decl. Exh. 6):1 13 11. Special Provisions Applicable to Advertisers 14 You can target your desired audience by buying ads on 15 Facebook or our publisher network. The following additional terms apply to you if you place an order through our online 16 advertising portal (Order):

17 1. When you place an Order, you will tell us the type of advertising you want to buy, the amount you want to 18 spend, and your bid. If we accept your Order, we will deliver your ads as inventory becomes available. When 19 serving your ad, we do our best to deliver the ads to the audience you specify, although we cannot guarantee in 20 every instance that your ad will reach its intended target. 21 * * * 22

23 6. We do not guarantee the activity that your ads will receive, such as the number of clicks your ads will get. 24 7. We cannot control how clicks are generated on your ads. 25

26 1 In or around January 2015, Facebook amended its terms of service by segregating the terms especially 27 applicable to self-service advertisers into a separate group of terms called the “self-serve ad terms” (see Dkt. Nos. 125-20 ¶¶ 8, 9, 125-25, 125-26). The amended terms of service incorporated by reference the self-serve ad terms. At We have systems that attempt to detect and filter certain 1 click activity, but we are not responsible for click fraud, technological issues, or other potentially invalid click 2 activity that may affect the cost of running ads. 3 Separate and apart from any of the terms that constituted the agreement between 4 Facebook and plaintiff, on a page in the advertiser help center section of its website, Facebook 5 made the following representation (Sec. Amd. Compl. ¶ 52; Simonsen Decl. ¶ 7, Exh. 5) 6 (emphasis original): 7 How does Facebook prevent and detect invalid clicks? 8 We do a few things to reduce the risk of abuse from invalid 9 clicks and help improve your ad performance like capping the number of times any ad is shown to a person, regardless 10 of whether they click on the ad.

11 There are two different types of clicks we consider invalid:

12 • Clicks from people that don’t indicate a genuine interest in the ad or show signs of ad testing. This includes 13 repetitive or accidental clicks and visits from the Facebook corporate network. 14 • Clicks generated through prohibited means, such as 15 fake accounts, bots, scrapers, browser add-ons or other methods that don’t follow Facebook Terms. 16 If we detect or are alerted to suspicious or potentially 17 invalid click activity, a manual review is performed to determine the nature of the activity. You will not be 18 charged for clicks that are determined to be invalid. 19 Plaintiff alleges that fake accounts, i.e., automated accounts not directly controlled by a 20 human, are a significant problem on Facebook. For example, as of December 2019 (plaintiff’s 21 last ads on Facebook ran in May 2018), Facebook had 2.5 billion monthly active users and an 22 average of 1.66 billion daily active users. In the fourth quarter of 2019, however, fake 23 accounts accounted for approximately five percent of the 2.5 billion monthly active users, or 24 125 million fake accounts on Facebook. 25 The complaint alleges that plaintiff’s sole managing member, Bill Doshier, reasonably 26 understood the above statements to mean that Facebook would not charge plaintiff for 27 “interactions” with plaintiff’s ads by fake accounts on Facebook. In addition, the complaint 1 alleges that Doshier reasonably understood Facebook’s representations, in particular, the 2 invalid clicks statement, to mean that when Facebook detected a fake account and removed it 3 from the platform, Facebook would go back and audit the fake account for prior “interactions” 4 with advertisements and refund the advertiser accordingly. Plaintiff further alleges that 5 Facebook’s statement that “You will not be charged for clicks that are determined to be 6 invalid,” was false and misleading because Facebook did not refund plaintiff even after 7 Facebook detected and removed an account because it was fake, and Facebook’s own records 8 showed that it had charged plaintiff for “interactions” by the account with plaintiff’s ads.

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dotStrategy Co. v. Facebook Inc, (N.D. Cal. 2021).

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